If you’re reading this its probably because you are thinking about applying for the DBE certification. The DBE certification is a great step for the entrepreneur who is new to working on government contracts. If you are an organized person and you are willing to read all the regulations and cases dealing with the DBE program, then you can probably prepare the application on your own. However, if you fall into any of the following categories – – STOP. Please hire someone to help you with your application because there is a high Probability your application will be denied.
1. If you have a business partner who is not socially and economically disadvantaged.
2. If your business requires a state license and someone else in your company holds that license.
3. If you used funds from a joint bank account to start your business.
4. If you own more than one company.
5. If you have full time job or you are a full-time student.
6. If one of your business partners is another company.
7. If you share office space, equipment or personnel with another company.
8. If you have been previously denied DBE certification.
9. If you are a broker.
10. If you are a trucking business and you do not own your own trucks or equipment.
11. If you acquired a controlling share of your business through a gift or you paid less than market value for the controlling share.
12. If you have any question at all regarding your eligibility for the program.
I have been helping individuals obtain the DBE and ACDBE certifications for several years now. Each of the items above is an actual legal issue that I resolved for one of my clients. Understand that if you apply for certification on your own and are denied, unless the agency denying you really screwed up, chances are you will not win on appeal. Therefore, it is imperative that you get it right the first time.

Disclaimer
The above are suggestions to help you in the event you decide to seek DBE certification. It is not legal advice. If there is any question at all about your chances of achieving certification you should refer to the DBE regulations at 49 CFR part 26 or contact your local small business office. You may also call me at (305) 755-9551 for a free 15 minute consultation.

Over 90% of people who call us about being denied DBE certification have been denied because they are in business with someone who is not socially and economically disadvantaged. A person can be non-socially and economically disadvantaged because they exceed the Personal Net Worth requirement of $1.32 million or the person is not a member of one of the presumptive groups of socially and economically disadvantaged individuals. In many cases the business partner is also a relative, spouse, brother etc. of the person claiming social and economic disadvantage status.
Luckily, the regulations governing the DBE program allow you to be in business with non-socially and economically disadvantaged individuals with one caveat: that person cannot be seen to control the DBE company. That’s where most people who get denied run into trouble.
Below are some tips if you are in business with someone who is not socially and economically disadvantaged:
1. Make sure you are the highest ranked individual in the company and make sure you are the highest paid individual. You should not be denied certification if you are not the highest paid person, but make sure you have a good explanation.
2. Make sure you have the technical expertise to run the business. If your business is construction you have to the experience and expertise to run the business. If you own a trucking business, you need to be able to drive the truck. Handling the office work, book keeping, and payroll alone is not considered controlling your business.
3. If you started the business with your spouse who is not socially and economically disadvantaged and you used funds from a joint bank account DO NOT apply for DBE certification with out first contacting us. You will need an agreement whereby your spouse relinquishes any interest in your portion of the business. Without out this agreement your certification will be denied.
4. Make sure you have someone who understands the DBE program (preferably a lawyer) review your corporate documents. Even if you own a controlling share of your company, your corporate documents may say differently or give your partner too much power in the eyes of the person reviewing your application.
5. Make sure that there are no outstanding loans from your partner or agreements that can give the partner control of your company.
If you are in any of the situations described above, contact us immediately. We can often help you resolve these issues before you apply for certification. It’s much more difficult to help after you’ve been denied.
Disclaimer
The above are suggestions are meant to help you in the event you decide to seek DBE certification. It is not legal advice. If there is any question at all about your chances of achieving certification you should refer to the DBE regulations at 49 CFR part 26 or contact your local small business office. You may also call me at (305) 755-9551 for a free 15 minute consultation.

Over the last few years we have received scores of calls and have been retained by numerous women business owners attempting to certify their firms as Disadvantaged Business Enterprises (DBE) or Airport Concessions Disadvantaged Business Enterprises (ACDBE). Often these firms are either facing difficulties attempting to get certified or have been decertified for a number of reasons.

In our experience, the most common reason for the denial or decertification of women owned businesses is the involvement of non-economically disadvantaged individuals in the business as owners, managers or other high-level positions. Often these non-economically disadvantaged individuals are the husbands of the female owner, or high level, male employees or qualifiers for the business. If a male individual is involved in the business, the reasons cited for denial can be lack of independence, control or ownership. This is often disconcerting for the woman owner because she often controls the day-to-day operations, the managerial and bookkeeping aspects of the business. However, control of those aspects of the business alone is not enough to show ownership, control and independence as defined by the Department of Transportation (DOT).

The regulations governing the DBE program specifically state that non-disadvantaged individuals can be involved in the business. Unfortunately, what the regulations state and how the rules are interpreted and enforced can be very different. The following are 10 tips for the woman business owner on how to obtain and keep your DBE certification.

1. Know your business. Knowing your business means having the technical expertise and knowledge to run your business. If, for example, you own a construction company, you will be expected to have the licenses, educational background and job history to actually run the business. Hiring personnel with the requisite expertise is not enough, especially if those key employees are men. You must be able to show that you can perform the work yourself. One key requirement that often trips up women business owners is allowing others to handle estimating and bidding functions. Handing these key functions overt to a male employee or owner is an almost guaranteed way to have your firm’s certification denied.

2. Own your business. Owning your business means showing the certifying agency that you, in fact, own your business. Borrowing money to start your business from a non-economically disadvantaged individual, subcontracting with only one male-owned company, and being a party to overly restrictive agreements are all reasons for your firm to be denied. The example we see most are firms that were once wholly owned by men, which become women owned by various devices. Firms in this category must be especially prudent in documenting how the woman owner came to own a controlling share of the company.

3. Know the difference between “family owned” and “woman owned”. The DBE regulations provide that if a certifying agency can’t tell if a business is owned and controlled by its female owner or her family, that firm can be classified a “family owned business” and be denied DBE certification. The prime example we see are companies owned jointly by husbands and wives.
Even if the wife in such a company owns 51% of the company, the firm can be denied certification if the wife fails to meet certain criteria such as having technical expertise, knowledge of the business, control of finances and other decision making processes.

4. Control the finances of your businesses. We have seen women owned business decertified or denied certification simply because a male employee or owner has unrestricted access to a firm’s bank accounts. As the owner of the company, the woman business owner must have full control of the company’s finances. If you must share signatory power on bank accounts with male employees or owners limit their signatory power. Banks will allow you to limit signatory power to a certain dollar amount, number of checks or other limitations. Having these limitations in place can assist you in obtaining your DBE certification by showing that you are in control of the firm’s finances.

5. Pay yourself. The DBE regulations require that the disadvantaged owner “must enjoy the customary incidents of ownership, and share in the risks and profits commensurate with their ownership interests, as demonstrated by the substance, not merely the form, of arrangements.” This has been interpreted to mean that the woman business owner must be the highest paid person in the firm. If the female owner is not the highest paid person, the burden is on her to show why this shouldn’t be held against her. If for some reason, you are not the highest paid person at your firm, be prepared to explain why and have the documents to back up your explanation.

6. Ensure that your corporate documents reflect control and ownership by a woman. We have seen woman business owners denied DBE certification because they relied on generic forms to create their company. Imagine, for example, a woman owns 51% of a firm and a non-disadvantaged individual owns 49% of the firm. However, the firm is managed by a board of directors consisting of the two owners who each have an equal vote. In that case, the woman owner will not deemed to be in control of the company because both owners have equal control over the company. Generic corporate documents such as bylaws and articles of organization often contain clauses that will guarantee you will be denied DBE certification. It’s imperative that you have an attorney who understands the requirements of the DBE program prepare and or review your corporate documents.

7. Keep your business independent. Sharing space, equipment or personnel with another firm, especially if the other firm is owned by a non-socially and economically disadvantaged individual, can lead to a denial. We even caution our clients to stay away from home-based business if they are married and their spouse is running his business from the home. Independence also becomes an issue if you only have one source of business, especially if that source of business is owned by a non-socially and economically disadvantaged individual(s). Your company should be self-reliant or you may deal with questions regarding whether your company is truly independent.

8. Avoid owning more than one company. The DBE regulations require that you devote your time to the DBE certified firm. Owning more than one company, even if that company is inactive, can cause your DBE certification to be denied or delayed. Additionally, your interest in any business other than the DBE firm will count towards your Personal Net Worth. Depending on the number of businesses you own and their value, this could cause you to exceed the Personal Net Worth requirement of $1.32M and cause you to be denied DBE certification.

9. Avoid full-time employment. Similarly to number 8 above, having a full-time job in a business other than the firm seeking DBE certification can cause your application to be denied. Similarly, being a full-time student can result in your application to being denied.

10. Don’t engage in fraud. We have seen instances where female employees are asked by their employers to create firms so that the employer can take advantage of the DBE program and other certification programs. Don’t do it! First, it is illegal and can get you into serious trouble. Second, it is relatively easy to spot such companies. Remember, the burden is on the DBE applicant to prove that she meets the requirement of the program. The certifying agency will have access to all sorts of documentation, including your corporate documents, tax returns and other information that can easily show whether your company is legitimate or not.

Hopefully, the tips provided above will assist you as you seek DBE certification for your woman-owned business. If you have any questions or need any assistance, please feel free to call us at (305) 755-9551

When reviewing your Disadvantaged Business Enterprise (DBE) certification application the certifying agency seeks, at a minimum, to determine whether a socially and economically disadvantaged person (S&ED) owns 51% of the company and whether the S&ED meets the personal net worth requirement of the program.

But in order to be certified, the S&ED must also show true ownership of the firm, independence from any other company and the ability to control the firm. If the S&ED owner(s) does not possess the power to direct or cause the direction of the management and policies of the firm, certification can be denied. Similarly, if the disadvantaged business owner’s contribution of capital to acquire her ownership interest in the firm was not real, substantial, and continuing, certification can be denied. Likewise, if the socially and economically disadvantaged person has no experience in the firm’s line of business, certification can be denied. A review of rules regarding ownership, control and independence follows.

OWNERSHIP

To be an eligible DBE, the rules state in part, that a firm must be at least 51 percent owned by socially and economically disadvantaged individuals. In the case of a corporation, such individuals must own at least 51 percent of the each class of voting stock outstanding and 51 percent of the aggregate of all stock outstanding. In the case of a partnership, 51 percent of each class of partnership interest must be owned by socially and economically disadvantaged individuals. Such ownership must be reflected in the firm’s partnership agreement. In the case of a limited liability company, at least 51 percent of each class of member interest must be owned by socially and economically disadvantaged individuals.

The rules further state that contributions of capital or expertise by the disadvantaged owner to acquire an ownership interest in the participating DBE business be real and substantial and continuing, going beyond pro forma ownership of the firm as reflected in ownership documents.

Under the rules, contributions of capital or expertise by the socially and economically disadvantaged owners to acquire their ownership interests must be real and substantial. Examples of insufficient contributions include a promise to contribute capital, an unsecured note payable to the firm or an owner who is not a disadvantaged individual, or mere participation in a firm’s activities as an employee.

For purposes of determining ownership, certifying agencies are required to presume as not being held by a disadvantaged individual, all interests in a business or other assets obtained by the individual as the result of a gift, or transfer without adequate consideration, from any non-disadvantaged individual or non-DBE firm who is (i) involved in the same firm for which the individual is seeking certification, or an affiliate of that firm; (ii) involved in the same or a similar line of business; or (iii) engaged in an ongoing business relationship with the firm, or an affiliate of the firm, for which the individual is seeking certification.

To overcome this presumption and permit the interests or assets to be counted, the rules state that the disadvantaged individual must demonstrate by clear and convincing evidence, that (i) the gift or transfer to the disadvantaged individual was made for reasons other than obtaining certification as a DBE; and (ii) the disadvantaged individual actually controls the management, policy, and operations of the firm, notwithstanding the continuing participation of a non-disadvantaged individual who provided the gift or transfer.

ACTUAL CONTROL

The rules require that the disadvantaged owner possess the power to control day-to-day and major decisions of their firms in critical matters. Non-disadvantaged persons may be involved in a DBE firm as owners, managers, employees, stockholders, officers, and/or directors. However, non-disadvantaged persons must not possess or exercise the power to control the firm, or be disproportionately responsible for the operation of the firm.

The rules state in part, that a disadvantaged owner may delegate various areas of the management, policy making, or daily operations of the firm to other participants in the firm, regardless of whether these participants are disadvantaged individuals. Such delegations of authority must be revocable, and the disadvantaged owner must retain the power to hire and fire any person to whom such authority is delegated. The managerial role of the disadvantaged owner in the firm’s overall affairs must be such that the certifying agency can reasonably conclude that the disadvantaged owner actually exercises control over the firm’s operations, management, and policy.

The rules further require that the disadvantaged owner have the technical competence and experience directly related to the type of business in which the firm is engaged and the firm’s operations. The disadvantaged owner is not required to have experience or expertise in every critical area of the firm’s operations, or to have greater experience or expertise in a given field than managers or key employees. The disadvantaged owners must have the ability to intelligently and critically evaluate information presented by other participants in the firm’s activities and to use this information to make independent decisions concerning the firm’s daily operations, management, and policymaking. Generally, expertise limited to office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm is insufficient to demonstrate control.

Finally, the rules state in part, that a disadvantaged individual may control a firm even though one or more of the individual’s immediate family members (who themselves are not socially and economically disadvantaged individuals) participate in the firm as a manager, employee, owner, or in another capacity. If the certifying agency cannot determine that the disadvantaged owners — as distinct from the family as a whole — control the firm, then the disadvantaged owners have failed to carry their burden of proof concerning control, even though they may participate significantly in the firm’s activities.

INDEPENDENCE

The rules provide that only an independent business may be certified as a DBE. An independent business is defined as a company whose viability does not depend on its relationship with another firm or firms. In determining whether a potential DBE is an independent business, certifying agencies scrutinize relationships with non-DBE firms, in such areas as personnel, facilities, equipment, financial and/or bonding support, and other resources. They consider whether present or recent employer/employee relationships between the disadvantaged owner(s) of the potential DBE and non-DBE firms or persons associated with non-DBE firms compromise the independence of the potential DBE firm. They also examine the firm’s relationships with prime contractors to determine whether a pattern of exclusive or primary dealings with a prime contractor compromises the independence of the potential DBE firm.

TIPS FOR NOT BEING DENIED.

Based on the above, a company desiring to be certified should ensure that it doesn’t make the following mistakes:

Ensure that any transfer of stocks/shares or ownership does not coincide with the submission of your DBE application.

Avoid transferring stock/shares/ownership as gifts or with no or little exchange of funds.

If the S&ED individual has no experience in line of business ensure that the S&ED obtains formal training and or degrees or certifications in the line of business.

One of the things I’m always telling my clients is that there are some things you do that make business sense and there are other things you do to get DBE certified – and they are not necessarily the same!

The DBE program has some very specific, and often, peculiar rules that sometimes make no business sense at all. If you don’t know those rules, it can trip you up and cause you to be denied DBE certification. The following are some real life examples we’ve dealt with:

Scenario 1:

A client once came to me after she had been denied DBE certification because the certifying agency claimed that she did not control her business. The basis of that decision? My client’s father had lent her $50,000.00 just before she applied for certification. When I spoke to her father, he explained that he was in business for many years and he thought there was no way his daughter could be DBE certified without showing that she had the funds to actually carry out the work she was proposing to do. Of course, there is no requirement in the DBE program that you show adequate capitalization. In the end, we counseled the client not to appeal the denial and simply wait a year to reapply. We also counseled her to repay the loan as soon as possible.

Scenario 2:

A client was denied because the certifying agency thought her husband who was not an owner or employee of the business had too much control. The reason? My client had made her husband a signatory on the firm’s bank accounts so that in case of emergency her husband could sign checks on her behalf. Even though the husband was employed in a completely different line of business and had no other involvement in his wife’s business, the certifying agency ultimately decided the husband had too much control.

Scenario 3:

My client ran a company that had multiple offices in multiple states. He travelled back and forth between the various offices. However, the day to day management of each office was handled by area managers. He had obtained DBE certification in multiple states with no problem. When he applied to a state (State B) he was informed that his DBE certification was denied. That state decided that because he did not reside in the state and did not handle the day to day activities of the local office himself, he could not be DBE certified. Luckily for my client, State B didn’t follow the rules for Interstate Certification. We were able to get State B to reverse the denial. Once the denial was reversed my client withdrew his application because he did not want to risk losing his other DBE certifications.

Scenario 4:

Our client’s annual No Change Affidavit was due right after the tax filing due date. However, he normally filed his taxes late. This was not a problem until the certifying agency decided that he had exceeded the Personal Net Worth limit of the DBE program. Although it made business sense for him to file his taxes late, in order to remain in the DBE program he was forced to file his taxes in order to show that he continued to be below the PNW threshold.

In all of these scenarios the client had to balance between what made business sense and what made sense under the DBE program. Ultimately, in order to remain in the program they had to do what made sense under the DBE program. As a DBE certified firm you will be presented with opportunities and scenarios that make perfect business sense but could jeopardize your DBE certification.

We have considerable experience counseling and assisting DBE certified firms. If you need any advice on anything involving your DBE certification gives a call or email me today.

If you apply for DBE certification and your certification is denied you can file an appeal to the Department of Transportation’s Departmental Office of Civil Rights. According to the rules governing the DBE program, it is the Department’s policy to make its decision within 180 days of receiving the administrative record.

Many appellants mistakenly believe that this means their decision will be rendered within 180 days of filing the appeal. This is incorrect. The Department gives itself 180 days after receiving the entire administrative record to render a decision. This means that after you file your appeal the DOT will request that the agency which denied you provide their file on the matter. The 180 days doesn’t start until the Department receives that agency’s records.

If the DOT doesn’t make its decision within the 180 time frame, the DOT is supposed to provide “written notice to concerned parties, including a statement of the reason for the delay and a date by which the appeal decision will be made.” While it is helpful when the DOT complies with this requirement it doesn’t help you get a decision any quicker. So what should you do if the DOT takes a long time to decide your DBE appeal?

First, write or call the Departmental Office of Civil Rights and ask where they are in the process. They should readily provide this information to you. If they don’t, you can also do a Freedom of Information Act request to the DOT asking for your entire file which should include any correspondence from the agency that denied your certification and any internal documents that DOT has prepared on your case including draft decisions or notes. Alternatively, you can write the agency that denied you and ask for your entire file including anything they sent to the DOT. Under the rules governing the DBE program you are entitled to access your file. Additionally, many states have Public Records or Open Records laws that require the state agency provide you with your file upon request. Once you know when DOT received the “entire record” you can figure out when your decision was due.

Once you know the status of your appeal, the next step is to ge the DOT to render a decision in a timely manner. This may mean getting your elected representative involved or even filing suit against the DOT.

We recently learned that the Departmental Office of Civil Rights purportedly has a backlog of DBE appeals that have not been decided. This backlog is being blamed on “an unusually heavy docket and diminished staff”. We did a FOIA request to the DOT and learned that as of February 2014 there were at least 79 firms whose decisions were beyond the 180 day mark.

If you have a question about why your DBE appeal decision is delayed or you want to explore options to expedite a decision on your case give us a call at (305) 755-9551 or email me at dbedirectcertificationguide@gmail.com.

A year ago the Department of Transportation’s Office of Inspector General or OIG issued an eye-opening and critical report on the DOT’s Disadvantaged Business Enterprise (DBE) and Airport Concessions Disadvantaged Business Enterprise (ACDBE) programs. The OIG found problems in the way the programs are implemented and in DOT’s ovesight of the state agencies that are responsible for implementing the program. The OIG also found that the DOT does not provide adequate training to state agencies and that significant amounts of funds are lost or don’t find their way to DBEs due to poor internal controls over certification processes. You can download the complete OIG report here:

We receive calls every week from people whose DBE applications have been denied. Unfortunately, in about 95% (or more) of those cases it’s too late to help. That’s because once you’ve been denied, it’s too late to try to correct your application or provide the agency with any additional information. Once you been denied the process is closed and your only options are to wait a year to reapply (after you’ve corrected whatever issues were brought up in the denial) or appeal the denial decision.

Under the regulations, once you are denied you have 90 days to appeal to the Department of Transportation (DOT). The DOT can take up to 180 days (6 months) to make a decision. If the DOT sides with the Agency’s denial you have to wait an additional year before you can reapply for DBE certification.
So whether you choose to wait to reapply or you appeal, one small mistake can cost you up to a year or more wait for DBE certification. It gets worse.

We have seen cases where the DOT agrees the applicant is correct on one issue but provides the Agency with another reason upon which to base a denial. We have also seen cases where the DOT will send the application back to the Agency for further review. This costs you even more time without a DBE certification. Finally, we have seen cases where even after the applicant makes all of the changes brought up in the original denial and waits a year, they are denied either for the same reason or different reasons.

When you add up the lost opportunity costs, the costs of filing an appeal, the time it costs you to prepare your application, sometimes it makes more sense to retain a firm like ours to prepare your application. After speaking to individuals whose applications have been denied, they often comment that they wished they had spoken to us before they’d applied. My advice is don’t be one of those people. Get professional help before you apply not after you’ve been denied.

Florida DBE Certification Resource Guide

The U. S. Department of Transportation mandates that recipients of federal financial assistance must participate in a statewide UCP (Unified Certification Program). The UCP is meant to be a “one-stop” shop for all firms seeking the Florida DBE certification in a state. Once certified by a member the statewide UCP, a firm is certified throughout the state.

Florida DBE Certification UCP

Florida’s UCP came into effect in July 2005. Members of Florida’s UCP come in two forms – certifying members and non-certifying members. Certifying members are those members which actually process Florida DBE Certification applications and certify firms as DBE (or ACDBEs). Non-certifying members are members who receive federal transporation dollars and utilize DBE company to statisfy their small business goals. Non-certifying members do not process Florida DBE Certification applications.

DBE Certification Florida: Road, highway and bridge

If your firm engages or intends to engage in road, highway or bridge planning design, construction or maintenance related goods and services you should submit your Florida DBE application to the Florida Department of Transporation (FDOT), regardless of where your firm is located in Florida. Submit applications to FDOT at:

Florida Department of Transportation

605 Suwannee Street, MS 65

Tallahassee FL 32399-0450

DBE Certification Florida: Airport related goods

If your firm engages or intends to engage in airport related goods and services, including concessions, you should submit your DBE application to the FAA Certifying Member located closest to your primary business or with whom you already have an ongoing contractual relationship. FAA Certifying Members include the following:

Melbourne Airport Authority

Hillsborough County Aviation Authority

Sarasota Manatee Airport Authority

Miami Dade County

Jacksonville Airport Authority

Greater Orlando Aviation Authority

St. Petersburg/Clearwater International Airport

Key West International & Florida Keys Marathon Airport

Palm Beach International Airport

Panama City-Bay County Airport & Industrial District

If your firm engages or intends to engage in transit related goods and services you should submit your Florida DBE Certification application to the FTA Certifying Member located closest to your primary business or with whom you already have an ongoing contractual relationship. FTA Certifying Members in Florida who handle the Florida DBE Certification application are the following:

Balance of any credit card or other consumer loans. Name of banks, address etc.

Copy of a cancelled company check

Amount of funds in any investment accounts or bank accounts.

Number of part-time and full time employees.

Owners’ home phone #, cell phone #, & company fax #

What did you use to start the company? County will want to see a copy of the first check deposited in the bank account.

Do you use an outside firm for management or payroll? If yes, name of company and contact information.

What were the Company’s three largest contracts over the past 3 years? For each, I need the name of the owner, location of the company, type of work performed and the dollar value of the contract.

What are the three largest contracts you are currently working. For each, I need the name of the owner, location of the company, type of work performed, the dollar value of the contract, the project start date and the anticipated completion date.